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Managers' earnings forecasts and intra-industry information transfers

Authors
Journal
Journal of Accounting and Economics
0165-4101
Publisher
Elsevier
Publication Date
Volume
11
Issue
1
Identifiers
DOI: 10.1016/0165-4101(89)90012-8
Disciplines
  • Logic

Abstract

Abstract The effect that voluntarily disclosed managers' earnings forecasts have on the security prices of the announcing firms and other firms in the same industry is examined. The results are consistent with information content in managers' forecasts and with information transfer between forecast firms and other firms in the industry. These inferences are drawn from firms' abnormal returns computed from single- and two-index pricing models - where the latter includes market and industry indexes. Interestingly, while a positive information transfer is evident with market model residuals, once industry cross-sectional covariation in firms' returns is removed, no directional relation is apparent.

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